Valencia Containerised Freight Index

VCFI General

The Valencia Containerised Freight Index (VCFI) saw a slight decline of -3.01% in July compared to the previous month, reaching 1,835.95 points. Notwithstanding this decline, the index has achieved a growth of 83.59% since the beginning of the series in 2018. The most recent period under review saw a decline in freight to a number of destinations, including the Far East (-16.64%), Latin America Atlantic (-18.54%) and the Indian Subcontinent (-19.88%). Conversely, there was a notable rise in freight from Central America and the Caribbean (11.10%) and Atlantic Europe (8.84%).

In July, the shipping industry continued to operate in a challenging environment, with persistent geopolitical tensions affecting shipping routes and raising operating costs. Notwithstanding these challenges, the growth rate of the global economy and the development of trade remain pivotal to the demand for container shipping services. The International Monetary Fund (IMF) forecasts that global GDP will grow by 3.2% in 2024, while the United States, the world’s largest importer, is projected to grow by 2.6%. The expansion of the US economy, with a focus on goods and retail, presents a favourable environment for container shipping.

The ongoing situation in the Red Sea is set to remain a significant factor influencing shipping demand in 2024, particularly in terms of TEU miles. It is anticipated that the route around the Cape of Good Hope will continue to be affected by this conflict. Furthermore, in July, which is traditionally a month of high demand, there is a possibility that volumes may have been brought forward to avoid delays and supply chain issues.

In line with this, the seasonally adjusted RWI/ISL container throughput index reached 130.4 points in its latest reading, indicating a stable global container throughput compared to the previous month. While there was no month-on-month growth, the underlying trend remains positive. The decline in European ports has been compensated for by growth in other regions. While container traffic in Chinese ports showed a slight increase, the North Range index, which reflects economic development in the north of the Eurozone and Germany, saw a decline from 112.9 points in the previous month to 111.3 points in July.

In July, the maritime transport sector saw a notable decline in the number of inactive cargo ships in operation, representing just 0.6% of the global container fleet capacity, according to data from Alphaliner. Following a period of minimal growth over the previous four weeks, the commercially idle fleet saw a slight reduction in the middle of July. However, despite some fluctuations, the capacity share of idle vessels has remained below 1% since January, even during the traditionally ‘weak’ periods of the year. This indicates that the overall fleet of lines is fully employed and does not show any signs of structural inactivity.

In line with previous comments, tonnage supply remains constrained due to ongoing vessel diversion around Africa, persistent congestion in select key ports and an anticipated peak season with higher-than-expected cargo demand. Therefore, despite the significant expansion in vessel capacity, the equilibrium between supply and demand remains elusive. The latest survey conducted by Alphaliner on 15 July revealed that only 72 vessels, with a capacity of approximately 167,000 TEU, were classified as ‘commercially inactive‘ or without revenue-generating activity. This represents a negligible proportion of the global fleet, which encompasses 29.8 million TEU.

It is important to note that the global container fleet is projected to receive approximately 2 million TEU of incremental capacity between now and the end of 2024. The expansion of capacity will contribute to the gradual balancing of the global shipping market, particularly in the event of the Red Sea diversions continuing. The introduction of new vessels will enhance the supply balance. While the reopening of the Suez Canal or a potential decline in demand could reverse this trend towards overcapacity, these scenarios appear unlikely in the near to medium term. In the energymarket, the average price of Brent crude oil saw an increase in July, reaching $85.61 per barrel compared to $82.25 in June. This represents a 4.2% rise. In terms of the cost of VLSFO (Very Low Sulphur Fuel Oil), there was a slight increase from June, with prices rising from $624.17 to $639, representing a 2.3% rise. The price of Marine Gas Oil (MGO) increased from $802 in June to $828 in July, representing a 3.2% rise.

VCFI Western Mediterranean

The Western Mediterranean sub-index saw a 10.67% decline from the previous month, closing at 1,849.29 points. Since the beginning of the series in 2018, there has been an 84.93% growth in accumulated value. In terms of the dynamism of trade exchanges between Valenciaport and the reference countries that make up the area under analysis, the most recent data indicate a decrease in traffic with Morocco, while there has been an increase in activities with Tunisia and Algeria.

VCFI Far East

In the Far East region, there was a 16.64% decline to 1,959.65 points. Notwithstanding this decline, the index demonstrates a cumulative growth of 95.97% since the series commenced in January 2018. In the latest reading, Valenciaport’s trade with China, the region’s primary trading partner, has demonstrated a notable increase.

In conclusion, while consumer demand and anticipation of imports could maintain activity levels, there is uncertainty as to whether these record levels will be sustained during the traditional high season. On the supply side, the projected expansion of the global container fleet by the end of 2024 will help to balance the market, particularly if diversions in the Red Sea continue and demand remains robust. It is vital to monitor global developments to assess their impact on the shipping market.